Sales fell 1 percent, the Bristol, England-based, maker of
Davidoff and Gauloises Blondes said in a statement today,
compared with the median forecast of a 2 percent drop from five
analyst estimates in a Bloomberg News survey.

“The market as a whole has slightly improved in the past
quarter,” Imperial said, leading it to repeat its outlook for
the full year and its expectation of dividend growth of at least
10 percent. There was a “significant deterioration” in Russia,
which represents about 8 percent of the company’s selling
volume, though no more than 2 percent of profit.

The shares rose 1.2 percent to 2,555 pence at 8:02 a.m. in
London. They’ve still dropped 6.6 percent since July 14, the day
before the company said it would spend $7.1 billion on acquiring
tobacco and the Blu e-cigarette brands jettisoned by the $25
billion Reynolds/Lorillard Inc. megamerger. Imperial Chief
Executive Officer Alison Cooper plans to ramp up its U.S.
business and propel Imperial from laggard to leader in e-cigarettes amid an increase in smoking regulations and as people
increasingly turn their backs on traditional cigarettes.

“The results are pretty good, and for now we are not
overly concerned about Russia,” said Philip Gorham, an analyst
at Morningstar Inc. in Amsterdam. “The sales declines there are
likely to reverse once the geopolitical situation calms down. We
are very encouraged by the recovery in Europe, where Imperial is
obviously much stronger.”

Earnings Drop

Imperial generates about 65 percent of profit in the
European Union, according to estimates from Fitch Ratings.

“Whilst conditions are still tough in a number of our
markets, our footprint provides balance,” Cooper said in
today’s statement. “Our proposed acquisition of U.S. assets
will make us a stronger competitor” in the country.

Imperial’s earnings declined 5 percent in the first half as
it made supply-chain changes and invested in brands.

The acquisition of the Winston, Cool, Salem, Maverick and
Blu brands will deliver a return on invested capital of 10
percent in the first full year following completion and will be
“significantly” earnings enhancing, Imperial said in July.

With the completion of the transaction about 9 months away,
the company has to battle a number of headwinds, one of them
being the introduction of plain packaging in the U.K.

The U.K. government’s final consultation on whether to ban
branded cigarette packages concluded on Aug. 7, with plans to
pass legislation to outlaw them as early as next year.